''Did Pareto discover income and substitution effects? On an interpretation suggested by Hutchison''

( 2002, Vol. 2 No.2 )

Terence Hutchison (1953) has argued that in his Manual of Political Economy Vilfredo Pareto provided a verbal, non-mathematical description of income and substitution effects. Hutchison's claim on Pareto''s behalf is important since it would move the date of the discovery of the concept (if not the mathematical proof) of separate income and substitution effects back from 1915 to the 1906 publication of the original Italian language version of the Manual, and would reassign priority for the discovery from Slutsky to Pareto. This note reexamines this claim of Hutchison''s, and shows that in fact it is mistaken. Pareto did not actually discuss income and substitution effects as they are now understood. Rather, in the passage which Hutchison cites, Pareto was discussing the impact of a change in income, not prices, on quantities demand.